Nixon Peabody and Stone Pigman Score Joint Win in Case Over Ownership of Important Artwork Sold During World War II; Fifth Circuit Court of Appeals Clarifies Primacy of U.S. State Law over International Declaration

Ruling cites provenance of prized painting by leading German Expressionist Oskar Kokoschka as confirming current possessor’s rightful ownership; Austrian citizen challenged ownership by U.S. family that bought painting in 1946; decision shows that Terezin Declaration does not trump state law in art restitution claims

NEW ORLEANS (August 30, 2010) – In a ruling with far-reaching impact in the field of art restitution claims stemming from World War II, the U.S. Fifth Circuit Court of Appeals affirmed that a New Orleans family is the rightful owner of a prized early painting by noted German Expressionist Oskar Kokoschka.

In Sarah Blodgett Dunbar v. Claudia Seger-Thomschitz, the three-judge appeals panel, including Chief Judge Edith H. Jones, held that Mrs. Dunbar, whose mother purchased Kokoschka’s “Portrait of a Youth” in New York in 1946, is the artwork’s rightful owner under Louisiana state law. The case was heard on appeal from the U.S. District Court for the Eastern District of Louisiana, which had granted summary judgment to Mrs. Dunbar in 2009.

Mrs. Dunbar was represented by lawyers from Nixon Peabody LLP, along with the New Orleans firm of Stone Pigman Walther Wittmann L.L.C. The decision was handed down on August 20.

Nixon Peabody’s Thaddeus Stauber, one of the country’s leading lawyers in the oft-contested area of art provenance, said the Fifth Circuit’s decision is especially significant in light of recent international accords, such as the Terezin Declaration, which some attorneys have argued require reopening art restitution claims arising from World War II. The Terezin Declaration was signed at the Prague Holocaust Assets Conference in 2009 by 46 nations, including the United States; its legal impact was in question prior to the Fifth Circuit ruling.

“We made very important law with this ruling,” Mr. Stauber said of the Dunbar case. “This decision clarifies that the Terezin Declaration and similar multi-party statements do not create a modern-day cause of action and do not preempt state law in the U.S. This is the first legal determination on the effect of the Terezin Declaration, and it helps define for the international community what Terezin does and does not mean in the United States – in this case, that well intentioned international resolutions do not usurp the authority of state statutes. The Fifth Circuit has demonstrated that the Terezin Declaration does not carry the force of law in the field of art restitution claims.”

Mr. Stauber and Nixon Peabody colleague Sarah Andre worked in New Orleans with a Stone Pigman litigation team led by Phillip Wittmann and Jennifer Borum Bechet.

“It was a highly collaborative process, with the nuts and bolts of the litigation performed by both firms,” Mr. Stauber said. “Although our firm is a well recognized leader in art ownership cases, it was invaluable to have Stone Pigman on the ground in Louisiana, where the state’s legal code, along with our extensive international provenance research, was key in establishing ownership. I would never go into a jurisdiction such as Louisiana without top-notch local counsel that really knows the state’s Napoleonic codes. Jennifer is a well regarded federal litigator and former federal prosecutor, and Phil Wittman is a dean of the New Orleans trial bar. Our two firms made a formidable team and achieved a noteworthy result that advanced a key area of law governing ownership of assets.”

Since the start of the case, the two firms have been collaborating on a trade secrets case currently in litigation in Louisiana.

“Portrait of a Youth” was painted by Kokoschka in 1910 and is considered one of his seminal pieces. In 1939, it was owned by a Viennese Jewish family, the Reichels, prominent art collectors of their day. The Reichels sold several artworks, including “Portrait of a Youth,” to a Viennese art dealer, Otto Kallir, with whom they had had art dealings for years. It was from Kallir’s gallery in New York that Mrs. Dunbar's mother acquired the Kokoschka work in 1946. Mrs. Dunbar inherited the painting in 1973. After its 1946 sale the portrait was publicly exhibited and its provenance in the Reichel collection well documented.

Dr. Seger-Thomschitz, a modern-day claimant unrelated to the Reichels, alleged that she is the sole heir of a descendant of the painting’s pre-World War II owners, and that “Portrait of a Youth” left the Reichel family through forced sale to Kallir, whom she claimed was a Nazi collaborator. Mr. Stauber, who leads Nixon Peabody’s Art & Cultural Institutions Practice, directed an extensive investigation in Europe and the United States that tracked the painting’s true provenance. It revealed that Kallir had paid the Reichels for “Portrait of a Youth” and that in the post-war years they had never asserted a claim to it, despite the family having survived the war and maintained contact with Kallir.

In 2008, Dr. Seger-Thomschitz wrote to Mrs. Dunbar to assert ownership of the Kokoschka artwork, prompting Mr. Stauber to file suit on Mrs. Dunbar’s behalf to quiet title to the painting, based on the historical research and Louisiana’s statute of acquisitive prescription. Dr. Seger-Thomschitz countersued, alleging that the sale to Otto Kallir was invalid. Dr. Seger-Thomschitz further alleged that Mrs. Dunbar’s mother, Sarah Blodgett Platt, should have known, or at least suspected, at the time she bought the painting that it had been illegally seized in Europe.

The district court, as affirmed by the 5th Circuit, found no evidence for these unsupported theories, citing the Nixon Peabody and Stone Pigman legal team's historical research on the claim's lack of merit as justification for applying Louisiana law in this case. During oral argument before the 5th Circuit, a member of the three-judge panel – recalling Mr. Stauber’s assertion that historical research demonstrated the claim's lack of merit – expressed that the district court's decision confirming the current owner's rightful ownership was a fair result even in light of the war's tragic history.

“This shows that the decision was not a legal anomaly but rather a thorough probing of the claim,” said Mr. Stauber. “We are pleased that the courts recognized the credibility and importance of our provenance research and understood the need, as we do, to closely examine the specific facts and historical evidence of sensitive art restitution claims." Mr. Stauber added that work by independent provenance researcher Laurie Stein was critical to determining and presenting evidence of the painting's true provenance.

“Our detailed historical evidence demonstrated that the painting was not stolen by the Nazis, nor forcibly sold, as asserted by the claimant,” Mr. Stauber said. “This was important to our victory under Louisiana law.”

The district court rejected Dr. Seger-Thomschitz’s argument that Louisiana prescription laws should in this case give way to “federal common law” in order to uphold the objectives of the 1998 Holocaust Victims Redress Act (HVRA). It further noted that Mrs. Dunbar’s ownership of the painting had been “open and continuous for well over ten years, fulfilling the requirements to establish ownership by acquisitive prescription under Louisiana law.”

At the appeals level, Dr. Seger-Thomschitz argued that the Terezin Declaration, and U.S. policy objectives embodied in it and the HVRA, should supersede Louisiana state law. In the affirmation decision, Chief Judge Jones wrote, “Louisiana’s laws are well within the realm of traditional state responsibilities… Louisiana’s prescriptive laws are not preempted by the Terezin Declaration, U.S. foreign policy, or the President’s foreign affairs powers.”

This was not the first time that Mr. Stauber and Nixon Peabody have prevailed on art restitution cases. The firm brought and won bellwether cases on behalf of the Detroit Institute of Art and the Toledo Museum of Art, both of which were cited as supporting precedent in the Fifth Circuit decision in Dunbar.

“Louisiana property law is unique in the U.S. in that it is derived from the civil law system of France and not from English common law, as is true of property law in most other states,” said Stone Pigman’s Ms. Bechet. “It was especially important in advancing this case for Thad and his team to get local counsel well versed in Louisiana law. In the end, critical precedent was settled regarding contested ownership of works of art and the reach of international declarations and federal authority into U.S. state law. It was a significant victory for the state of Louisiana as well as for Mrs. Dunbar.”